Oil prices stabilize, set for weekly gain on hopes for supply cut

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Reuters
KEY POINTS
  • Brent crude futures were 1 cent higher at $56.35 a barrel by 0439 GMT, after gaining 1% the previous session. Brent is 3.4% higher for the week, the first increase since the week of Jan. 10.
  • U.S. West Texas Intermediate (WTI) futures were 4 cents higher at $51.46 a barrel. The contract rose 0.5% on Thursday and is now 2.2% higher for the week.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices were steady on Friday, but set for their first weekly gain in six weeks on the assumption that major producers will implement deeper output cuts to offset slowing demand in China caused by the coronavirus epidemic.

Brent crude futures were 1 cent higher at $56.35 a barrel by 0439 GMT, after gaining 1% the previous session. Brent is 3.4% higher for the week, the first increase since the week of Jan. 10.

U.S. West Texas Intermediate (WTI) futures were 4 cents higher at $51.46 a barrel. The contract rose 0.5% on Thursday and is now 2.2% higher for the week.

“Oil prices appear to have stabilised this week on optimism that OPEC+ will once again do whatever it takes to tighten output and on hope that the coronavirus peak is nearing,” said Edward Moya, senior market analyst at OANDA in New York.

Crude prices have plunged about 20% from their 2020 peaks on Jan. 8 as oversupply concerns combined with worries about large fuel demand declines in China as the country’s quarantine to fight the coronavirus outbreak has stymied economic activity.

In response to the demand slump, the Organization of the Petroleum Exporting Countries (OPEC) and its allied producers, known as OPEC+, are considering cutting output by up to 2.3 million barrels per day.

“Sentiment remains cautious across Asia-Pacific region, due to virus uncertainty,” said Margaret Yang, market analyst at CMC Markets, adding that the extent of the virus-led global oil demand destruction remained unclear.

But other analysts caution the demand impact is only limited to China so far.

“The spread of the coronavirus remains extremely fluid and while market sentiment is held at the mercy of each passing coronavirus headline, our baseline thesis remains that oil demand destruction remains largely a China story and has yet to spill over to impact global demand,” said Helima Croft, head of commodity strategy at Citadel Magnus.

The market is signalling that some near-term demand for oil remains. The spread between the first-month April Brent future and the May contract has narrowed to a discount of only 1 cent a barrel on Friday from a discount of 33 cents a week ago.

The narrowing of this contango — a market situation that occurs when prompt prices are less than later-dated contracts — suggest that demand for oil is improving for Brent-related crude.

Still, some concern remains about the impact the Chinese demand slowdown may have.

The International Energy Agency (IEA) on Thursday said that first quarter 2020 oil demand is set to fall versus a year earlier for the first time since the financial crisis in 2009 because of the coronavirus outbreak in China.

Oil climbs after Russia backs possible output cuts to counter coronavirus impact on demand

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Reuters
KEY POINTS
  • Brent crude futures rose 32 cents, or 0.6%, to $55.25 a barrel by 0104, after falling 0.6% on Thursday.
  • U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.5%, at $51.21 a barrel, having gained 0.4% the previous session.
  • A panel advising the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia, known as the OPEC+ group, suggested provisionally cutting output by 600,000 barrels per day (bpd), three sources told Reuters on Thursday.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices rose on Friday after Russia said it backs a recommendation for the OPEC and its producer allies to deepen output cuts amid contracting demand for crude as China battles the coronavirus epidemic that has hit global markets.

Brent crude futures rose 32 cents, or 0.6%, to $55.25 a barrel by 0104, after falling 0.6% on Thursday. U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.5%, at $51.21 a barrel, having gained 0.4% the previous session.

A panel advising the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia, known as the OPEC+ group, suggested provisionally cutting output by 600,000 barrels per day (bpd), three sources told Reuters on Thursday.

“We support this idea,” said Sergei Lavrov, Russia’s Foreign Minister, when asked about the proposal at a news conference in Mexico City later in the day.

Oil prices have fallen by more than a fifth since the outbreak of the virus in the city of Wuhan in China.

Chinese President Xi Jinping declared a “people’s war” on the epidemic as China’s Hubei province, where Wuhan is located, reported 69 new deaths, taking the total in the country to more than 600.

“The impact of the coronavirus on the oil market remains largely a Chinese demand story with weakening jet fuel demand and economic run cuts, but demand destruction outside of China has been minimal, for now,” RBC Capital Markets analysts said in a note.

Oil jumps as WHO declares emergency but recommends no travel, trade restrictions

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Reuters
KEY POINTS
  • Brent crude futures jumped $1.16 to $59.45 a barrel by 0532 GMT, after falling 2.5% the previous session. Brent is still down 2% for the week.
  • U.S. West Texas Intermediate (WTI) futures were up by $1.06 to $53.20 a barrel. The contract fell 2.2% on Thursday and is now 1.8% lower for the week.
Reusable: BP North Sea rig oil field
Andy Buchanan | WPA Pool | Getty Images

Oil prices jumped on Friday following sharp losses this week, as the World Health Organization (WHO) came out against travel and trade restrictions in declaring a global emergency over the spread of a coronavirus that originated in China last year.

Oil prices fell nearly 4% through Thursday this week — hitting three-months lows — before rebounding on Friday, with investors and traders worried over how spread of the virus would impact demand for oil and its products.

“WHO’s decision … to oppose restricting travel and trades against China boosted market confidence, even though the organization declared a global health emergency,” said Margaret Yang, market analyst at CMC Markets.

Brent crude futures jumped $1.16 to $59.45 a barrel by 0532 GMT, after falling 2.5% the previous session. Brent is still down 2% for the week.

U.S. West Texas Intermediate (WTI) futures were up by $1.06 to $53.20 a barrel. The contract fell 2.2% on Thursday and is now 1.8% lower for the week.

The WHO on Thursday declared that the coronavirus outbreak in China — which has killed more than 200 people there and has spread to some 18 countries — now constitutes a public health emergency of international concern.

Despite the rebound in prices on Friday, analysts remained cautious and warned of further downside risks if the virus continues to spread.

“Oil’s January correction, a 13% drop to be exact, was ripe for a bounce,” said Edward Moya, senior market analyst at OANDA in New York.

“Oil is likely to remain vulnerable despite today’s optimism that the coronavirus has likely been contained,” he said.

Italy’s government decided to halt all air traffic between Italy and China, and airlines including Air France, American Airlines and British Airways have stopped flying to Chinese cities.

“An escalation in alert levels around the world will likely curb demand travel and thus energy,” said CMC’s Yang.

Driven largely by a drop in Chinese domestic and international transport activity, world oil demand was adjusted lower by 500,000 barrels per day in the first quarter of 2020, according to estimates from Wood Mackenzie consultant Yujiao Lei.

Prices were also buoyed by reports that Saudi Arabia has opened a discussion about moving an upcoming output policy meeting to early February from March following the recent slide in oil prices.

Oil rebounds, but markets ‘twitchy’ over China virus impact on demand

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Reuters
KEY POINTS
  • Brent crude futures were up 24 cents, or 0.4%, at $62.28 a barrel by 0456 GMT after falling 1.9% the previous session. For the week, Brent is down 4%.
  • U.S. West Texas Intermediate futures were 24 cents, or 0.4%, higher at $55.83 a barrel. The contract fell 2% on Thursday and is 5% lower for the week.
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Jean-Paul Pelissier | Reuters

Oil prices edged up on Friday, helped by a decline in U.S. crude stockpiles, but were on track for to fall up to 5% for the week on worries that the China coronavirus that has killed 25 so far may spread, curbing travel, fuel demand and economic prospects.

Brent crude futures were up 24 cents, or 0.4%, at $62.28 a barrel by 0456 GMT after falling 1.9% the previous session. For the week, Brent is down 4%.

U.S. West Texas Intermediate futures were 24 cents, or 0.4%, higher at $55.83 a barrel. The contract fell 2% on Thursday and is 5% lower for the week.

″(The) virulent sell-off on the … flu scare was mollified by a timelydecline in U.S. crude inventories,” said Stephen Innes, market strategist at AxiTrader.

“Oil prices could remain on a slippery slope as traders remain incredibly twitchy about the effects the coronavirus outbreak could have on Chinese GDP and air travel more broadly,” said Innes.

The virus has infected more than 800 so far in China, with 25 dead as of Thursday, according to China’s National Health Commission. The World Health Organisation has declared the situation an emergency, but stopped short of declaring the epidemic of international concern.

Most of the cases are in the central Chinese city of Wuhan, where the virus is believed to have originated late last year, though cases have now been found in at least seven other countries.

Offering some support for prices was news that U.S. crude oil and distillate inventories fell last week, the Energy Information Administration said on Thursday.

Though they failed to match analysts’ expectations in a Reuters poll of a 1 million barrel drop, crude inventories did decline by 405,000 barrels in the week to Jan. 17, government data showed.

Elsewhere, refined fuel exports from India jumped in December as its slowing economy crimped domestic demand.

India’s refined fuel exports rose 24.2% in December year-on-year to 6.46 million tonnes, the fastest growth since October 2016, official data released on Thursday showed.

Oil slump deepens as China virus casts cloud over fuel demand, economy

CNBC

Reuters
KEY POINTS
  • Brent crude futures were down 82, or 1.3%, to $62.39 a barrel by 0400 GMT, and earlier dropped to the lowest since Dec. 4 after falling 2.1% the previous session.
  • U.S. West Texas Intermediate futures fell 86 cents, or 1.5%, to $55.88 a barrel after earlier falling to the lowest since Dec. 3. The contract declined 2.7% on Wednesday.
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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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Oil prices fell to their lowest in seven weeks on Thursday, sliding more than 1% on concern that the spread of a respiratory virus from China may lower fuel demand if it stunts economic growth in an echo of the SARS epidemic nearly 20 years ago.

Brent crude futures were down 82, or 1.3%, to $62.39 a barrel by 0400 GMT, and earlier dropped to the lowest since Dec. 4 after falling 2.1% the previous session.

U.S. West Texas Intermediate futures fell 86 cents, or 1.5%, to $55.88 a barrel after earlier falling to the lowest since Dec. 3. The contract declined 2.7% on Wednesday.

The so-called novel coronavirus has killed 17 people through respiratory illness since it emerged late last year in Wuhan, a city of 11 million people in central China. Nearly 600 cases have been confirmed and city authorities have shut transport networks, urging residents not to leave to prevent the contagion spreading.

The potential for a pandemic has stirred memories of the Sudden Acute Respiratory Syndrome epidemic in 2002-2003, which also started in China, and dented economic growth and led to a slump in travel.

“Downside demand risks due to the Wuhan virus appear to be a growing concern for the market, and understandably so, with any clampdown on travel likely to weigh on fuel demand,” ING Research said.

Overseas airlines, along with rail operators from Hong Kong and elsewhere have also started shutting down connections to Wuhan, essentially now in lockdown.

“We estimate a price shock of up to $5 (a barrel) if the crisis develops into a SARS-style epidemic based on historical oil price movements,” JPM Commodities Research said in a note.

The U.S. bank maintained its forecasts for Brent to average $67 a barrel in the first quarter and $64.50 a barrel throughout 2020.

Elsewhere, amid all the concern about hits to demand, supply remains plentiful.

U.S. crude stockpiles rose last week by 1.6 million barrels, against expectations of a drop, the American Petroleum Institute said late on Tuesday.

Brazil also produced more than a billion barrels of oil in 2019, a first for the South American nation, the national oil regulator said on Wednesday.

Meanwhile China released data on Thursday showing its gasoline exports are surging, rising nearly a third last year as more new refineries are opened.